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The FBI arrested the proprietor of Silk Road, the industry-leading online black market for buying and selling drugs, in San Francisco yesterday, according to several reports.

An FBI criminal complaint [PDF] alleges that Ross William Ulbricht, whose listed aliases include “Dread Pirate Roberts” and “Silk Road,” violated federal law by delivering, distributing and dispensing controlled substances “by means of the Internet.” Heroin, cocaine, LSD, and methamphetamine are listed specifically, although Silk Road offered access to a much broader variety of drugs. Ulbricht is charged with operating the website, as well as soliciting “a Silk Road user to execute a murder-for-hire of another Silk Road user, who was threatening to release the identities of thousands of users of the site,” according to the FBI document.

Time Newsfeed reporter Jessica Roy reports that Department of Justice documents show that the FBI also seized $3.6 million worth of Bitcoin. In the report, FBI agent Christopher Tarbell describes Silk Road as “the most sophisticated and extensive criminal marketplace on the Internet today.”

Tarbell claims several thousand drug dealers had used Silk Road to move hundreds of kilograms of drugs to “well over a hundred thousand buyers,” and estimates that the site generated $1.2 billion in sales and $80 million in commissions.

Information gleaned from the FBI’s investigation into the servers hosting the website showed that Silk Road had more than 957,000 accounts as of July. Between February 2011, when the FBI began its investigation, and July of this year, more than 1.2 million transactions were completed.

In addition to drugs, Silk Road was also used to solicit a variety of other illegal services, including hacking social networking accounts for identity theft, hacking ATM machines, and connections to real-world services for counterfeit money, stolen credit card information, firearms and ammunition, and hit men in more than 10 countries, the report claims. The site used the Tor network to help maintain anonymity.

“The site has sought to make conducting illegal transactions on the Internet as easy and frictionless as shopping online at mainstream ecommerce websites,” the report says.

Although he managed a small staff of administrators, Ulbricht is believed to have “controlled and overseen all aspects of Silk Road,” including the computer infrastructure, the website’s code, and all of the site’s profits.

Ulbricht graduated from the University of Texas with a bachelor’s degree in Physics in 2006, and attended grad school at the University of Pennsylvania from 2006 to 2010. After earning his graduate degree, Ulbricht claimed on LinkedIn to have “shifted” his goals, and explained that he was more interested in “creating an economic simulation” that would “give people a first-hand experience of what it would be like to live in a world without the systemic use of force” by “institutions and governments,” the report claims.

Ulbricht first revealed his true identity when he started looking to hire people to work on Silk Road in October 2011. In a post to a Bitcoin Talk forum, an anonymous account called “altoid” sought “IT pros in the Bitcoin community” who were interested in working for “a venture backed Bitcoin startup company.” Those interested were told to contact the email address “rossulbricht at gmail dot com,” according to the FBI. That slip up tipped the FBI to Ulbricht’s social profiles, IP address and eventually his home address.

One section of the report explains Ulbricht’s alleged “willingness to use violence to protect his interests in Silk Road.” In March, a Silk Road vendor using an account called “FriendlyChemist” sent messages to Ulbricht threatening to release a list of the site’s user’s actual names and addresses unless Ulbricht paid him $500,000, which the extorter claimed to have needed “to pay off his narcotics suppliers,” the report says.

In ensuing messages with an account called “redandwhite” that purported to be FriendlyChemist’s suppliers, Ulbricht allegedly called the user a “liability” and said “I wouldn’t mind if he was executed.” He then provided what he believed to be the name and hometown - White Rock, British Columbia, Canada - of the user behind the FriendlyChemist account.

In the ensuing four days, the two accounts negotiated the murder of the user behind the FriendlyChemist account for $150,000, and confirmed that it had been completed by sending “a photo of the victim” on March 31, 2013, the report claims.

However, the FBI’s investigation suggests that no such murder was ever committed.

“Although I believe the foregoing exchange demonstrates DPR’s intention to solicit a murder-for-hire, I have spoken with Canadian law enforcement authorities, who have no record of there being any Canadian resident with the name DPR passed to redandwhite as the target of solicited murder-for-hire. Nor do they have any record of a homicide occurring in White Rock, British Columbia on or about March 31, 2013,” the report says.

At one point, while negotiating a price for the hit, Ulbricht suggested that this was not the first time he’d sought this kind of arrangement.

“Don’t want to be a pain here, but the price seems high,” Ulbricht allegedly wrote. “Not long ago, I had a clean hit done for $80k. Are the prices you quoted the best you can do? I would like this done asap [sic] as he is talking about releasing the info on Monday.”

The arrest is the culmination of what appears to be a crackdown on Internet drug services. On Sept. 21, online drug market place Atlantis, which positioned itself as the more user-friendly alternative to Silk Road and even went as far as offering discounts to users who had left Silk Road, announced that it was shutting down “due to security reasons outside of [their] control,” adding that they “wouldn’t be doing this if it weren’t 100% necessary.”

Colin Neagle covers emerging technologies and the startup scene for Network World. Follow him on Twitter @ntwrkwrldneagle and keep up with the Microsoft, Cisco and Open Source community blogs. Colin's email address is cneagle@nww.com.